Auditors of privately owned businesses must follow a code of conduct. As an auditor, you abide by your state’s code of conduct, but you also follow the code of conduct established by the American Institute[more…]

Here’s something every auditor should remember: Just because a client comes to you and wants you to audit its financial statements, you don’t have to accept the engagement. After all, you’re not selling[more…]

When deciding whether to accept an auditing engagement, you must judge your independence and objectivity. If your audit firm lacks independence or objectivity, you can’t accept the engagement. Independence[more…]

As an auditor, to make sure you don’t have any conflict-of-interest problems, you have to look at any third-party transactions your potential client may have been part of. If your potential client has[more…]

You have to judge a client’s accounting competence and integrity before accepting an auditing engagement. If the client lacks accounting skills and integrity, you should seriously consider not accepting[more…]

If a potential auditing client’s records appear reliable and your firm can provide an impartial audit, you still need to make sure you can perform all the tasks the client needs. You also have to figure[more…]

When taking a new client, an auditor creates an engagement letter to solidify audit arrangements between the audit firm and the client. The letter serves as the contract, detailing the duties and obligations[more…]

Part of your job as a staff associate in an auditing firm is to document your findings in working papers (also known as workpapers) and schedules. Workpapers summarize your audit actions, such as planning[more…]

Auditors must determine risks when working with clients. One type of risk to be aware of is inherent risk. While assessing this level of risk, you ignore whether the client has internal controls in place[more…]

During your risk-assessment procedures before you begin an audit, you interview members of the company and observe how they do their jobs to make your assessment of control risk. Company management is[more…]

Detection risk occurs when you don’t use the right audit procedures or you don’t use them correctly. You assess inherent and control risk and then solve your audit risk equation by assigning detection[more…]

When performing an audit, you use risk assessment procedures to assess the risk that material misstatement exists. This step is very important because the whole point of a financial statement audit is[more…]

Auditors refer to financial statement information that’s not 100 percent correct as a misstatement. You’ll probably never see a set of financial statements that’s completely accurate. But misstatements[more…]

When you find misstatements as you perform an audit, you’re responsible for making an assessment. You alone must determine whether the misstatement represents an error or fraud. Errors aren’t deliberate[more…]

You’ll hear auditors referring to the triangle of fraud. That’s because in most fraudulent acts, three circumstances lead to the commission of fraud: the incentive to commit fraud, the opportunity to carry[more…]

As you do your investigative work getting to know your audit client, following your risk assessment procedures, and assessing the risk of material misstatement, you must extensively document everything[more…]

As an auditor you have to assess management’s financial statement presentation and disclosure. The financial statements (income statement, balance sheet, and statement of cash flows) and notes to the financial[more…]

When you are performing an audit, you are responsible for assessing management assertions about classes of transactions. Five management assertions are related to classes of transactions. Four of them[more…]

As an auditor you have to analyze your client’s account balances. Management assertions address the correctness of balance sheet account balances at year-end. These account balances include the company’s[more…]

Audit evidence documents give you the substantiation for your professional audit opinion. When performing an audit, you must assess the nature, competence, sufficiency, and evaluation of the audit evidence[more…]

In addition to being thorough and unbiased when evaluating audit evidence, you also want to apply professional judgment by adopting an attitude of professional skepticism. When exercising professional[more…]